“Right of Redemption” of Paper “Money”

“Right of Redemption” of Paper “Money”

THE MONETARY CONJURER’S TRICK

“Right of Redemption” of paper “Money”: The Monetary Conjurer’s Trick

From the very first, Federal Reserve Notes were denominated “advances” and “obligations”—that is, instruments and evidence of debt. True “money”, however, is the most liquid of all assets, not a debt that might be repudiated, and certainly not a debt that has been serially repudiated. And if Federal Reserve Notes were from the start to be “redeemed * * * in gold or lawful money”, they obviously were never conceived to be either “gold” or “lawful money”. So, because by definition the only official “money” the law recognizes is “lawful money”, by law Federal Reserve Notes were never (and are not now) actual “money” at all, but at best only some sort of substitute for “money”.

The monetary conjurers’ trick has been, slowly, steadily, and stealthily, to reverse this understanding in the public’s mind. That is, to make the substitute pass for the real thing, and then remove the real thing from the operation. This subterfuge was not overly difficult to put over. After all, in the term “redeemable currency”, which is the noun and which the adjective? When people deal with a “paper currency redeemable in gold”, the natural uninstructed inclination is to treat the paper currency as “money” and the gold as something else. The paper currency, as the saying goes, is merely “backed” by gold—but of course is not itself gold. And because the currency is not itself gold, the money-manipulators can remove the gold “backing” farther and farther into the background, without affecting the nature of the paper as “currency” (at least nominally). Thus, a “redeemable currency” can be converted into a “contingently redeemable” or “conditionally redeemable” currency, through temporary suspension of specie payments (as happened repeatedly during the Nineteenth Century); and then into a full-fledged “irredeemable currency”, through permanent suspension of specie payments, as with Federal Reserve Notes after 1933 domestically and 1971 internationally. (footnote 1) Yet, to the average citizen (whose most serious liability is mental inertia), even though a paper currency’s promise of redemption has been dishonored, it nonetheless remains “currency”. (footnote 2)

Thus one grasps that the so-called “right to redemption” attached to any paper currency is actually a liability, inasmuch as it exposes the holders of that currency to repudiation and expropriation, because they possess only the paper, not the gold. Even in the best of times, the holders of redeemable paper currency are not economically and politically independent. Rather, they depend upon the honesty and the competence of the money-managers. This is why America’s Founding Fathers, realists all, denominated redeemable paper currency as “bills of credit”. They knew that such bills’ values in gold or silver are always contingent upon the issuers’ credit—that is, ultimately, the issuers’ honesty and ability to manage their financial affairs. The unavoidable trouble with “bills of credit”, though, is that they can (and usually do) turn out to be “bills of discredit”, when the holders discover that the money-managers are dishonest and incompetent—or worse, as is the situation today, highly competent at dishonesty. Then the holders of the paper currency (if they are sufficiently astute) realize how unwise it is to allow the gold to remain in the custody of the very institutions and individuals with the greatest incentives, and the uniquely favorable positions and opportunities, to steal it. (footnote 3)

When the money-managers refuse to redeem their currency, what can the holders of that currency do to protect themselves?

When the money-managers refuse to redeem their currency, what can the holders of that currency do to protect themselves? Well, what were they able to do in 1933 and in 1971? Nothing. If the holders of Federal Reserve Notes had enjoyed an effective, enforceable “right” to the gold the Federal Reserve System and the Treasury of the United States promised to pay in redemption of those notes—that is, if the currency had been “redeemable” in the only meaningful sense that redemption was absolutely assured as a matter of law and especially fact—the gold seizures of 1933 and 1971 would never have happened. The ostensibly “redeemable” character of paper currency of the pre-1933 and pre-1971 types did not protect the holders of that currency. Instead, it turned out to be the very device used to deceive and defraud them, then divest and dispossess them of gold—proving in perhaps the most palpable manner possible that a society’s acceptance of “redeemable currency” is the product of confusion and the invitation to inevitable economic and political disaster. (footnote 1)

Footnotes:

When the money-managers refuse to redeem their currency, what can the holders of that currency do to protect themselves? Well, what were they able to do in 1933 and in 1971? Nothing. (footnote 4)

Sound, honest, and constitutional “Money” has NO “backing” consisting of or based on something else. It needs no “backing”, because it has substance in and of itself. It is ACTUAL GOLD, not a mere promise to deliver gold. Sound, honest, and constitutional “Money” cannot be repudiated, because it does not need to and cannot be “redeemed”. It is the ABSENCE of “redeemability”—the complete LACK OF NECESSITY OR DESIRABILITY for “redeemability”—that constitutes the essence and provides the strength of sound, honest, and constitutional “Money”. (footnote 5)